So, should you have a flutter on the Royal Mail

[TrueBlueTerrier]

So, should you have a flutter on the Royal Mail? ALEX BRUMMER explains why there are good business reasons to be cautious

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The Government could be very disappointed if it expects a rush of retail investor interest in the estimated £3billion share flotation of the Royal Mail.

Driven by Tory Business Minister Michael Fallon, the Coalition is seeking to attract ordinary investors by offering a relatively modest entry level to the share register of £750 and a good interest rate return on the shares estimated at 7 to 8 per cent.

That may looking very tempting to savers who have been starved of decent returns in the bank – because of a record low bank rate of 0.5 per cent – and the negative impact of quantitative easing (printing new money) on collective investments such as pensions.

The Government could be very disappointed if it expects a rush of retail investor interest in the estimated £3 billion share flotation of the Royal Mail

But there are reasons of confidence and industrial relations why this particular offering may not have the same allure as the famous ‘Tel Sid’ campaign of 1986, which brought consumers out in their tens of thousands for shares in British Gas.

Those who jumped on the British Gas bandwagon and stayed on through thick and thin have done remarkably well turning an investment in 1,000 shares at a cost of £1,350 into £12,080 – an amazing increase of 795 per cent.

However, many small shareholders will have suffered a huge loss of confidence in stock market investment as a result of the events surrounding the collapse of the American investment bank Lehman Brothers five years ago next week.


Holders of shares in Halifax Bank of Scotland, Northern Rock, Bradford and Bingley and other former building societies saw their wealth wiped out in a matter of days as share prices plummeted and the Government was forced to take many financial institutions under state control.

Consumers have also lived through five arduous years when inflation has outpaced wage increases, leading to a huge squeeze on incomes. This together with the prevailing view that the City is made up of unscrupulous bankers – out for quick profits at the expense of the taxpayer – is not very propitious for the private investor.

The dangers of union disruption are well illustrated by British Airways, which was privatised in 1987, and has spent two and half decades battling with its workforce with adverse consequences for its shares

Even if retail investors had the confidence to take a punt on Royal Mail shares there are also good business reasons to be cautious.
The Communications Workers Union, which represents most posties and sorting office staff, is in the process of balloting its members over what the Royal Mail describes as a generous 8.6 per cent three-year pay deal.

The truth is, however, that the unions oppose privatisation, even though they are to be given 10 per cent of the company for nothing, because they fear that under private ownership there will be ruthless cost cutting that will destroy their livelihoods and pension rights. It would not generally be considered smart to launch a share offering in the face of a national strike.

Among the potential outcomes of a Royal Mail privatisation is that like so many other UK utilities, from energy to water, the company could end up in foreign ownership

The dangers of union disruption are well illustrated by British Airways, which was privatised in 1987, and has spent two and half decades battling with its workforce with adverse consequences for its shares.

If the Royal Mail’s feisty Canadian chief executive, Moya Greene, is eventually successful in seeing off the strike challenges then the prospects for a privatised Royal Mail are not without promise.

Letter deliveries have been falling by some 5 per cent a year for a long time as electronic mail, even for important legal documents, supplants paper. However, the boom in online retailing means that the Royal Mail’s Parcelforce delivery service here and in Europe is enjoying boom conditions.

The group also sits on valuable undeveloped property assets at Mount Royal in the heart of London and in cities across the country. Its databases, used for its direct mail operations, could also prove to be highly valuable.

Among the potential outcomes of a Royal Mail privatisation is that like so many other UK utilities, from energy to water, the company could end up in foreign ownership. That could damage the commitment to a universal postal service available to every citizen and business.

The Government says that its remaining stake and the army of small investors will act as a bulwark against overseas predators. That is far from being a cast iron defence.

[UnhappyGremlin]

The dangers of union disruption are well illustrated by British Airways, which was privatised in 1987, and has spent two and half decades battling with its workforce with adverse consequences for its shares

This could be our future. Those that still have a job, that is.

The truth is, however, that the unions oppose privatisation, even though they are to be given 10 per cent of the company for nothing,(BRIBE in a pathetic attempt to avoid a strike) because they fear that under private ownership there will be ruthless cost cutting that will destroy their livelihoods and pension rights. It would not generally be considered smart to launch a share offering in the face of a national strike.

My reason for wanting a strike, to protect my job and pension. And to stop it being slashed to increase profits for shareholders.

The group also sits on valuable undeveloped property assets at Mount Royal in the heart of London and in cities across the country.

Not to mention the developed sites that they are slowly selling off and amalgamating offices to allow this.

That couldWILL damage the commitment to a universal postal service available to every citizen and business.

The Government says that its remaining stake and the army of small investors will act as a bulwark against overseas predators. That is far from being a cast iron defence.

But for how long? 3 years. 5 at a push?
An investor only needs 51% and that's it, new owners/boss, they will have the ability to do pretty much what they want then.
And there are plenty of predators in the UK too.

[I-POSTIE]

I must be missing something? The author of the top piece thinks that £750 is, “…a relatively modest entry level to the share register..” At the very best of times, no matter how small the entry level, a sale to the general public is not accurately a sale open to everyone. Even in this country, unfortunately, too many people live too close to the bread line to have spare cash to speculate any of their savings on the stock market. They are, as are all of us, far better off with Royal Mail kept public, collecting our dividends as a reasonably priced, universal delivery service, six days a week. It is a sale to those whom have enough excess capital, that they would not feel the pinch should they lose it. That rapidly whispered information, which trails off at the end of radio and television financial commercials, - “Your investment may go up as well as down …” - is the reality of the stock market and the reason why most reasonable people cannot afford to justify risking £750. Effectively, the voice says, “don’t come crying to us if the situation goes XXXX up!” So to whom is this Tory government aiming this sale at in the current economic slump? Is it those whom are trying to keep house and home together as prices rise and wages stagnate or is it the well heeled, mostly Conservative voting, upper-middle and upper classes wanting to make a quick killing on the stock market at everybody’s expense? When trading opens on these shares our competitors will rush in to buy as many shares as possible. Most probably they will not achieve an absolute controlling amass of shares they will nevertheless want to be in possession of as large amount as possible in order to have some influence with the board of directors whom rely on their votes (one vote per a share) to maintain their place on the board or in some cases removing directors and replacing them with someone whom is more accommodating as to how they want Royal Mail to operate for their benefit. Remember these mailing companies will still require the use of the DSA system after privatisation. Many of them do not have a letter delivery system and none of them are scrapping close to the USO with their current forays into deliveries. Ultimately, in the initial scramble for shares on the stock market, those private speculators, whom can afford the £750 or more, will benefit from the hike in the price of their shares by selling them to the battling parties involved whom will pay an inflated price just to get hold of them. No wonder the government have prevented employees from selling their free shares for the first three years of ownership; that would severely dilute the price on day one of trading. Does it not smack of the rich making the rich richer or am I just being cynical?

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Cynical: "Believing that people are motivated by self-interest; distrustful of human sincerity or integrity."

[wandle]

I would guess that it's precisely because the government could not find a potential buyer who was willing and / or financially able to cough up the asking price, that they have been forced to go for a flotation on the London Stock Exchange, as a means to privatise Royal Mail.